Definitions

Question 0

Positive statements

Answer 0

Claims that attempt to describe the world as it is

Question 1

Opportunity cost

Answer 1

• Next best alternative that must be given up to obtain something
• value of one good measured in terms of the other good

Question 2

Normative statements

Answer 2

Claims that attempt to prescribe how the world should be

Question 3

Normal good

Answer 3

A good for which, other things being equal, an increase in income leads to an increase in quantity demanded

Question 4

Absolute advantage

Answer 4

The ability to produce a good using fewer inputs than another producer
fewest inputs/resources

Question 5

Inferior good

Answer 5

A good for which, all things being equal, an increase in income leads to a decrease in quantity demand

Question 6

Comparative advantage

Answer 6

The ability to produce a good at a lower opportunity cost than another producer
** lowest opportunity cost**

Question 7

Equity

Answer 7

distributing economic prosperity fairly among the members of society
** distribution of income**

Question 8

Economics

Answer 8

The study of how society managers it’s scarce resources

Question 9

Scarcity

Answer 9

The limited nature of society’s resources

Question 10

Externality

Answer 10

The uncompensated impact of one person’s actions on the well being of a by stander

Question 11

Market economy

Answer 11

An economy that allocates resources through the decentralised decision making of many firms and households as they interact in markets for goods and services

Question 12

Inflation

Answer 12

An increase in the overall level of prices in the economy

Question 13

Productivity

Answer 13

The quantity of goods and services produced from each hour of a workers time

Question 14

Marginal change

Answer 14

A small incremental adjustment to a plan of action

Question 15

Market power

Answer 15

The ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Question 16

Market failure

Answer 16

A situation in which a market left on its own fails to allocate resources efficiently

Question 17

Microeconomics

Answer 17

The study of how households and firms make decisions and how they interact in markets

Question 18

Macroeconomics

Answer 18

The study of economy wide phenomena, including inflation, unemployment and economic growth

Question 19

Production possibilities frontier

Answer 19

A graph that shows the various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology

Question 20

Substitutes

Answer 20

Two goods for which a decrease in the price of one good leads to a decrease in the demand for the other good

Question 21

Complement

Answer 21

Two goods for which a decrease in the price of one good leads to a increase in the demand for the other good

Question 22

Opportunity cost

Answer 22

The best alternative that must be given up to obtain some item

Question 23

Quantity demanded

Answer 23

The amount of a good that buyers are willing and able to purchase

Question 24

Quantity supplied

Answer 24

The amount of a good that sellers are willing and able to sell

Question 25

Equilibrium

Answer 25

A situation in which supply and demand have been brought into practice
Supply = demand
Quantity supply=quantity demand

Question 26

Invisible hand

Answer 26

The idea that buyers and sellers freely interacting in a market economy will create an outcome that allocates goods and services to those people who value them most highly and makes the best use of our scarce resources

Question 27

Price elasticity of demand

Answer 27

A measure of how the quantity demanded of a good responds to a change in the price of that good demanded

Question 28

Efficiency

Answer 28

Society getting the most from its scarce resources